For the first time in nearly four decades, Ghana’s economy has gone into a recession as it has contracted consecutively for two quarters – induced by the impact of coronavirus – data from the Ghana Statistical Service has shown.
According to GSS latest GDP data, the economy contracted again in the third quarter by 1.1 percent from the -3.2 percent recorded in the second quarter 2020; thereby, sending the economy into recession and breaking a 37-year-long growth cycle, as the last recession was recorded in 1983 – a year characterised mainly by political instability, famine and other economic unrests.
The third quarter’s contraction is attributed largely to the pandemic’s effect on the hospitality sector as the hotel and restaurants industry saw a contraction of 62.1 percent. It was followed by the mining and quarrying sector, which also saw a contraction of 16.9 percent.
In terms of real-sector performance, the agriculture sector was the only one to see growth, as it recorded an impressive 8.3 percent growth from the previous quarter’s performance of 2.5 percent, whereas the other two sectors – industry and services – both saw a contraction of 5.1 and 1.1 percent in the third quarter.
Despite agriculture growing at a significant rate, this could not overturn the fortunes of the economy – considering the sector’s contribution to overall growth is smaller than the other two sectors. While agriculture’s contribution to GDP stands at 23 percent, industry and services contribution to growth is at 35 and 42 percent respectively. This explains why a huge contraction in the hospitality sector – which is a sub-sector under services – resulted in an overall contraction of the economy.
In terms of the economy’s monetary worth, GDP at constant prices – taking the effect of inflation out – recorded GH¢41billion; whereas GDP at current prices was GH¢92billion.
Despite the record-breaking recession, government says it does not expect a further contraction as Finance Minister Ken Ofori-Attah projected, in the first-quarter 2021 budget, that the economy will grow at 1.9 percent at end of the year, against an IMF forecast of 0.9 percent.
The Bank of Ghana’s Composite Index of Economic Activity (CIEA) has also projected end of year growth at 2 to 2.5 percent, on the back of positive responses across all sectors after government lifted almost all restrictions imposed to contain spread of the pandemic in the country.
To ensure the economy is brought back to life, government has launched the ambitious GH¢100billion Ghana COVID-19 Alleviation and Revitalisation Enterprises Support (Ghana CARES) programme.
The three-and-half-year programme dubbed ‘Obaatan Pa’ – to be rolled out in two phases – aims to raise 70 percent of its financing from the private sector and the remainder from government, to assist businesses surmount whatever challenge the pandemic brought on their operations.
The CARES programme will be carried out in two phases. First is the stabilisation phase, which aims at supporting enterprises’ recovery. These include paying outstanding obligations to contractors and suppliers; injecting liquidity into the system to ease the cash flow difficulties of businesses; developing another programme to support large businesses hard-hit by the pandemic; and also sourcing from the pharmaceuticals and textile and garment sectors and expanding procurement from local producers for its goods and services.
Other interventions in the programme are: establishing a guarantee scheme of up to GH¢2billion to enable business borrow from banks at more affordable rates; increasing funding to the CAP-BuSS programme being run by National Board for Small Scale Industries (NBSSI); and providing seed-funds for a retraining programme to help workers who are laid-off because of COVID-19 to develop new skills.
The second, which is the medium-term revitalisation phase, will include initiatives such as supporting commercial farming by complementing the Planting for Food and Jobs and Rearing for Food and Jobs programmes; providing targetted support to enable the private sector accelerate progress in building Ghana’s light manufacturing, technology, and digital-economy sectors.